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What You Need To Know About Crowd Funding

If you're looking to fund your own business, you've got a rough road ahead of you. Even with the implementation of the Small Business Jobs Act, the existence of angels or the numerous VCs out in the market, you still have no guarantee that your loan would be approved.

There are also options to bootstrap but if you're the kind of person who does not want to make too big of a risk using your own finances, don't fret. There's still one other option available for you. Crowd funding is becoming very popular nowadays and it's usually because of those I have stated.

What it isBasically, crowd funding is getting the funds you need by pooling money from those in your network, your clout. Before it started out as a trend to finance businesses, it was used as a way to help charities or to help in disaster relief operations and even electoral campaigns. You have heard of this but not quite in this term. Remember those telethons or other fundraising events? Crowd funding is in its basic term, a fundraiser.

The ConceptBecause of the proliferation of social media, crowd funding is usually done via online communities and your network which you'll get the funds, are usually non-professional financiers. For example, you need to raise $5,000 for your small business. You may use your LinkedIn/Facebook/Twitter account because you have a lot of contacts there who trusts you and knows you personally. You then contact them to solicit pledges for small amounts of money so that you could raise the $5,000 you need.

The ReturnThere are variations on getting a return if you make a pledge. Although there is no direct return usually offered, what the entrepreneur can do is to use a threshold pledge system which means that there would be a contract which says that if the amount is not raised in a specific time frame, the pledges would be returned. Another way is to display sponsorship once the business is up and running. Yet another is that the solicitation could be to offer a loan or microfinance.

Crowd funding may be the answer to the financial needs of your small business. It is fast growing in popularity as business funding and not just for charitable or electoral campaigns. You may consider this option if you're really strapped for cash but wants to venture in business anyway. One more great alternative to solving your business capital woes.